Sense & Centsibility Blog

How to Pay Collection Debt

Family at the receptionLike so many during the Great Recession, you lost your job and had to prioritize expenses.  Maybe you had to break a cable contract so you could manage the house payment, or you had to defer paying medical bills until things improved.  It wasn’t easy not paying all your bills because you always had, but it was the right thing to do. You are working again. Maybe earning less than at the job you lost, still things are looking up.  You received a nice tax refund that you prudently hung on to until you had a complete plan for it.   Part of your plan is to pay off some of those bills that have turned into collection accounts.  But, how do you do it?  Where do you start?


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Gather the bills and collection notices you threw into a box or paper bag.  Compare them to the reported collections on your credit reports.  I find making a chart or spreadsheet helps to organize the pile.  Leave space to put notes from phone conversations or action taken. Note: if the debt is a number of years old, know the statute of limitations in your state by contacting your State Attorney General’s office.  Understand your consumer rights!  Read Time-Barred Debts, available from the Federal Trade Commission by calling 877-382-4357, or click HERE to read online .


Call the most recent collector (debts change hands frequently and you want to be sure to send payment to the right place!)  Take detailed notes of the call and make sure to these questions:
  • Ask if they still have the debt.
  • If yes, what is the current balance? Request a written statement if you do not have one from the collector.   For some unknown reason, many collectors refuse to send them out, so be prepared to insist or threaten to file a complaint with your state’s Attorney General’s office.
  • Ask if they will delete the account completely from your credit report if you pay in full.  Request their agreement in writing.
  • Where do you send payment?  (Avoid giving out your bank account information.  Be firm about mailing the payment.)
  • If they do not have the debt, ask if they know where it is.


Always send the payment by certified mail with a request for a receipt of payment. What if a collection debt is too large to pay off with a single payment?  You have two options:
  • Set up a payment plan.
  • First, review your budget to determine an affordable payment.  We can help! Start counseling now.
  • Send a letter to the address on the most recent notice by certified mail with your payment plan.

Sample letter: Date

Creditor / Debt Collector Company Name Creditor / Debt Collector Company Address

Dear Creditor / Debt Collector:

I am writing to you about my account #__________on which I owe $_______.  I intend to pay the whole debt but cannot pay it all at this time. I can pay $________ each month and enclosed a check for this amount. You may contact me at the address below. Thank you for your understanding.


Your Name and Address and Account Number


  • Keep copies of all letters and payments.
  • Continue to open your mail to know if the debt has changed hands or if you are being sued or threatened with garnishment.  Seek legal advice, and attend a court date with your payment evidence.
  • Negotiate a settlement amount.
Always get an agreement in writing stating that the entire debt is settled with the agreed upon amount.  Send payment by the date specified, get a receipt of payment.  A settled debt is still considered a negative on your credit report.  The value is that it is over and done.  You can move on to taking other steps to rebuild your credit without fear of more serious collection efforts. Paying your collection debts can have a positive impact on your credit score.  More importantly, though, you will have the personal satisfaction of taking care of things and the relief of checking those collection debts off your recession recovery list! Author Mary Ellen Kaluza is a Financial Counselor at LSS Financial Counseling. Learn more by visiting our website at